Free Trade A Growth Tonic For The Austerity Blues

Trade: In an era of massive government spending, it seems the only answer is "austerity." Living within one's means is important, but it will fail without economic growth. Enter free trade. Will Obama take his big opportunities?

In the coming year, a major U.S.-European commission is expected to recommend that the U.S. and Europe begin negotiating a free trade agreement immediately. If President Obama acts on it, it could be a big achievement, blunting the feeble growth that has characterized his era by adding a $200 billion shot in the arm to both sides.

Already Europe is our largest trading partner with $1 trillion in two-way trade in 2011, accounting for more than half of all global trade. Columnist David Ignatius reports that the proposal is gaining steam on both sides of the Atlantic, with Britain's and Germany's leaders strongly urging Obama to follow through on talks, while Secretary of State Hillary Clinton said last month the U.S. is already in preliminary talks with the EU.

This isn't the only movement for free trade, either.

Last week, trade groups led by the Emergency Committee for American Trade (ECAT) announced that U.S., Australian, New Zealand and Canadian businesses were seeking "urgent action" by Obama to conclude the long-stalled Trans-Pacific Partnership by next year.

That pact, formed in 2005, would unite both Pacific Coasts through trade in an 11-way alliance of Australia, Brunei, Chile, Canada, Malaysia, New Zealand, Peru, Singapore, Vietnam, Mexico and the U.S. in what's now the U.S.' second largest trade market, accounting for 33% of all global trade.

The U.S. economy stands to gain billions, a shot in the arm from some of the world's most dynamic economies, ECAT says.

And don't forget Brazil with its $2.5 trillion economy.

Last September, Rep. Devin Nunes, a California Republican, told IBD that his "Economic Freedom Alliance Act" now making its way through Congress would put Brazil "on a course to solidify the important strategic alliance that has developed in recent years."

"It's one of the richest countries in the world if you look at natural resources, agriculture, ability to feed itself, rule of law, and economic growth potential," he said. "Brazil can be such a strong partner to help shore us up; imagine Brazil working with Chile and Colombia and us pushing the other way along with Canada and Mexico," against Latin America's demagogues.

There is also movement for a free-trade deal with Taiwan, a strong ally and $22 billion trading partner that only looks small on the map.

Last month, at Los Angeles International Airport, standing before the first Taiwanese tourists to travel to the U.S. under new visa-free conditions, Rep. Ed Royce, a California Republican, told IBD the goal of ending restrictions is "free trade with Taiwan. The U.S. needs to be part of Asia's phenomenal economic growth."

Royce added that while Asia has more than 200 trade pacts in place, "the U.S. is only party to four. We're tremendously disadvantaged if we don't (pursue more)."

Japan is also on the U.S. free-trade radar. It has just fallen into yet another recession, a result of nonstop government stimulus programs and closed markets.

The same free-trade dynamic that could revive the U.S. and Europe could give Japan a badly needed economic boost after two decades of stagnation.

Japan's leaders have asked to be able to join the Trans-Pacific Partnership talks. It's a good idea. But the U.S. shouldn't wait. We can sign a deal with Japan any time.

The point is, there are powerful free-trade opportunities for President Obama. It would help to boost the economy's growth, which is what we need now more than a round of economy-destroying tax hikes.

Free trade, of course, means free trade. Nothing good comes from managed trade, which is Obama's first instinct. Any deal that is signed should be clean of the special favors, handouts and carve-outs that mar most free-trade deals. Big Labor no doubt will be an obstacle, as will Europe's subsidy-addicted farm interests.

But if Obama wants to justify his administration to history, then economic growth must outpace big spending and subsequent austerity. The easy answer is free trade.

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